The Securities and Exchange Commission (SEC) filed a lawsuit against 34 defendants including six firms involved in the alleged microcap stock trading manipulation schemes.
According to the SEC, the six firms acted as unregistered broker-dealer and offered services to customers whose intention is to hide their ownership and manipulate the trading of microcap securities.
The SEC also named the owners and employees of the six firms, several customers, stock promoters, and two microcap issuers—Warrior Girl Corp and Natures Peak in the lawsuit.
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The SEC accused the defendants of fraud, manipulative trading, touting, and registration violations. According to the Commission, nine of the defendants are facing criminal charges due to their involvement in the stock manipulation scheme.
The Commission accused Moneyline Brokers and its founders Harold Bailey “BJ” Gallison II of illegally operating as a broker-dealer for US-based customers engaged in pump and dump schemes—artificially inflating the price of a stock and selling their stake. Moneyline Brokers is based in Costa Rica.
The SEC alleged that Moneyline and some of its employees regularly accepted transfers of microcap stocks from US-based customers. They had stock certificates reissued under the name of Moneyline to hide their ownership.
The Commission also accused Miami residents, Carl H. Kruse Sr. and Carl H. Kruse Jr. of conspiracy to manipulate trading in Warrior Girl Corp, a former shell company controlled by the father and son. According to the SEC, the Kruses colluded with Moneyline and others. They engaged in multiple trading manipulations and made illegal profits of approximately $2.3 million.
Furthermore, the SEC named New York residents, Charles S. Moeller of Sea Cliff, Mark S. Dresner of Dix Hills, and Frank J. Zangara of Locus Valley as defendants in the case. According to the SEC, these people made more than $2.5 million in profits in a scheme involving the trading of Everock, a mining company based in Canada that relocated to Nevada.
The mining company restructured itself with Nature’s Peak in 2008 and sold sandwich spreads. The defendants allegedly made illegal profits through a concerted campaign promoting the company including videos and postings on Facebook.
SEC is relentlessly pursuing entities behind microcap fraud schemes
Andrew M. Calamari, Director, SEC New York Regional Office said, “This case demonstrates the Commission’s resolve to relentlessly pursue the villains behind these microcap fraud schemes wherever in the world they may be hiding.”
“This case presents an excellent example of the capacity the Microcap Fraud Task Force has developed to pierce the layers of sham entities and nominee accounts that predators employ to harm investors and evade detection by law enforcement,” added Michael Paley, co-chairman of the Enforcement Division, Microcap Task Force of the SEC.
The SEC is demanding the defendants to return the ill-gotten profits with interests. The Commission is also seeking civil monetary penalties from almost all of the defendants, and prohibiting them from engaging in penny stock business and serving as officers and directors of public companies.